A CMO (collateralized mortgage obligation) is a structured product that is backed and collateralized by a pool of mortgage loans and similar debt arrangements. It is a type of mortgage-backed security (MBS) that consists of a collection of mortgages packaged together and sold to investors (in which case, the investors/ lenders or holders of the securities) as one unit. These underlying assets of the mortgage loans (e.g., mortgaged assets) provide a collateral if the loan ends up in default (in case the borrower runs into default on payment/ repayment). The proceeds collected from the pool of mortgages will be used to service the debt embodied in the securities held by the investors (the lenders).

As a type of mortgage-backed security (MBS), a CMO is also backed by separate pools of pass-through security mortgages that consist of multiple classes of holders and maturities (tranches). A pass-through security constitutes a debt obligation (and in a specific aspect, a derivative instrument) embodying the cash flows associated with a certain asset or liability. It simply passes future cash flows onto an investor, the holder of a respective share in the pool. The main types of this security are mortgage backed securities (MBS) and asset backed securities (ABS).

However, a CMO is not, per se, a pass-through security, despite the sheer similarities between the two, particularly the fact that both are securities created from pools of mortgages.